Protection from an Increasing Number of Climate Shocks

$2 trillion in combined spend request action from suppliers to protect against growing climate impacts

New York CityApril 15, 2015—Some of the world’s largest companies, Walmart, Toyota, Coca Cola and Bank of America, are part of a growing group of purchasers changing the way they engage with their supply chains to protect them from an increasing number of climate shocks.

CDP, an international non-governmental organization (NGO), which acts on behalf of investors to gather, synthesize and disseminate disclosure of environmental risks among companies, cities and suppliers, reports an unprecedented rise in membership of its supply chain program this year, showing the interest of procurers in addressing climate change.

The combined spend of CDP supply chain members requesting disclosure on greenhouse gas (GHG) emissions and environmental risk, including water risk, from their suppliers has almost doubled from $1.3 trillion in 2014 to $2 trillion in 2015.

By requesting environmental disclosure and action from their suppliers, these companies are aiming to build supply chains that are fit for purpose in a climate-changed world.

CDP’s supply chain members include 72 global corporations [1], the U.S. General Services Administration (the U.S. federal government’s largest procurer of goods and services), the Electronics Industry Citizenship Coalition (EICC) and the World Resources Institute. Together they sent a single request for data that can help them build more robust supply chains in the face of water stress and climate change to almost 8,000 companies globally, up from 6,500 in 2015.

Dexter Galvin, CDP’s head of supply chain says: “This huge rise illustrates the growing concerns of some of the world’s largest purchasers. These corporations want to maintain fully functioning and robust supply chains in a climate-changed world. We are seeing that decision-making in procurement is changing and the organizations in our program are leading that change. The general public is protected when supply chains are protected.”

The data being requested includes information on GHG emissions and intended reductions, as well as management of climate risks and opportunities. It should increase the information available in the marketplace significantly, while driving actions to reduce emissions. With climate change currently estimated to be contributing to the deaths of nearly 400,000 people a year, costing the world more than $1.2 trillion and expected to wipe 3.2 percent of gross domestic product (GDP) by 2030, monitoring supply chains for related vulnerability makes undeniable business sense.

“Engaging and training L’Oréal buyers has made it possible to mobilize suppliers and convince them that measures aimed at reducing greenhouse gas emissions play an inevitable part of a company’s global performance. Suppliers’ performance on climate change is fully included in supplier relationship and challenged during business reviews,” according to Miguel Castellanos, international director of hygiene, safety and the environment, L’Oréal

CDP’s current dataset, which is also used by investors via Bloomberg terminals and other platforms to assess risk within their portfolios, contains a treasure trove of stories that are seeping into procurement and investment decision-making across the globe. These informed decisions today may well be able to reduce predicted economic losses and help build a sustainable economy.